At Year End Dodgy Ltd Had a Balance in Accounts

question 10

Multiple Choice

At year end Dodgy Ltd had a balance in Accounts receivable of $40 000 and an Allowance for doubtful debts of $2 000. It was decided to write off as irrecoverable the debt of Houdini Ltd totalling $3 500. It was further decided that the Allowance for doubtful debts should stand at 10 per cent of Accounts receivable. What was the journal entry needed to bring the Allowance for doubtful debts to the required level after writing off the debt of Houdini Ltd?

• A) DR Bad debts expense $4 000
• CR Allowance for doubtful debts $4 000
• B) DR Bad debts expense $5 150
• CR Allowance for doubtful debts $5 150
• C) DR Bad debts expense $5 500
• CR Allowance for doubtful debts $5 500
• D) DR Allowance for doubtful debts $3 500
• CR Accounts receivable $3 500

Understand what constitutes a misrepresentation in contract law.

Recognize the importance of justifiable reliance on a statement for fraudulent misrepresentation.

Grasp the significance of nondisclosure in contract rescission.

Identify when a contract is voidable and the options available.

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